Market participants who’ve studied the price gap, known locally spil the &#x201C,kimchi premium,&#x201D, say Korea’s foreign-exchange and anti-money-laundering rules are making it difficult for traders to gobble up the proverbial free lunch.

The lack of selling pressure from arbitragers has left bitcoin prices ter Korea tethered to the quirks of the nation’s individual investors. The resulting boom has alarmed local authorities and underscored how fractured markets and feverish speculation can lead to strange outcomes ter the nascent world of cryptocurrencies.

It also helps explain why Coinmarketcap.com, a widely followed provider of gegevens on digital currencies, excluded Korean exchanges from some of its pricing calculations this week.

The stir, which created the appearance of a market selloff for the website’s users, helped spark a real-life uittocht from several digital currencies on Monday. Bitcoin sank more than Ten procent, according to composite pricing on Bloomberg. It retreated another Two.6 procent on Tuesday.

Despite the turbulence, bitcoin’s Korea premium shows few signs of disappearing. Below are some of the largest reasons why the gap has persisted, along with a few ideas on how arbitragers can still make money.

Strong Local Request

Koreans have an outsized infatuation with bitcoin. The country punches above its weight when it comes to cryptocurrency volumes, with local venue Bithumb ranked No. Two worldwide by Coinmarketcap.com. So many Koreans have piled te that the prime minister recently warned that bitcoin might omkoopbaar the country’s youth.

There’s no definitive explanation for why the fervor is so extreme, but some observers point to the long-held fondness for supercharged financial bets te a country that once boasted the world’s most active stock-index derivatives market.

It helps that local cryptocurrency exchanges don’t permit brief sales, making it difficult for bears to bet against the market. (The government also proposed banning non-residents from cryptocurrency venues te December.)

While policy makers have vowed to crack down on excessive speculation, that may just be adding fuel to the madness ter the brief term, said Mike Kayamori, head of Tokyo-based exchange Quoine, which counts Koreans among its customers.

&#x201C,Before regulation kicks te, people want to buy,&#x201D, he said.

Korea’s Forex Rules

To arbitrage the price gaps inbetween bitcoin venues ter Korea and elsewhere, local traders vereiste very first exchange their won into a foreign currency, such spil the dollar or euro, that’s accepted by overseas cryptocurrency venues.

Korea’s foreign-exchange regulations waterput a wrench te the process. Local residents and companies moving more than $50,000 out of the country te a single year vereiste submit documents to authorities proving their reasons for the transfers, which may not always be approved. Annual transactions totaling more than $Ten,000 vereiste be reported to tax authorities.

&#x201C,The won is a restricted currency, so cannot be lightly exchanged,&#x201D, said Cedric Jeanson, chief executive officer of BitSpread Group, which has offices ter Fresh York, London and Singapore.

Some traders are worried that foreign exchange purchases related to cryptocurrency arbitrage could trigger anti-money-laundering inquiries.

&#x201C,If you attempt to stir out of positions te Korea, they have tougher money-laundering devices,&#x201D, said Tony Pietrocola, head of business development at financial technology company PromonTech. &#x201C,To pack out the paperwork and do those transactions, you could lightly get flagged.&#x201D,

It’s worth noting that Korea isn’t the only country where bitcoin trades at a premium, even if it is the standout among major markets. Other nations with a history of capital controls, including Zimbabwe and Argentina, also have big price gaps versus the U.S.

Volatility Risk

&#x201C,Making a quick transaction with low risk is just not there for this space,&#x201D, said Ian Rosen, CEO of financial communications toneelpodium Stocktwits. &#x201C,There’s difficulty moving money te and out of exchanges.&#x201D,

Professional arbitragers with practice ter managing such volatility may be reluctant to operate on bitcoin exchanges because many of the venues are unregulated and vulnerable to hacking.

Potential Workarounds?

Moonsung Bae, a 36-year-old financial analyst ter Seoul who trades cryptocurrencies for his individual account, said he has profited from the kimchi premium without transferring funds into foreign currencies. Instead, he uses alternative cryptocurrencies like ether.

One of his strategies involves buying ether te Korea, transferring it to an offshore venue, exchanging it for bitcoin, transferring the bitcoin back to Korea, and cashing out. That works spil long spil Korea’s ether premium is smaller than the bitcoin premium, he said.

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Another option is arbitraging price differences inbetween Korean exchanges, Bae said. On Tuesday, bitcoin traded at the omschrijving of $21,751 on Bithumb, versus $22,674 on another Korean venue called Upbit. That compared with $15,255 on Coinbase, one of the largest U.S. exchanges.